Brexit in a week from 16/9 - 22/9/2019

Fundamental analysis

British Prime Minister Boris Johnson and European Commission President Jean-Claude Juncker met on September 16, 2019 and agreed on the need to intensify negotiations on the form of the brexit. Negotiations will therefore continue on a daily basis.

The President of the European Commission reiterated that UK must come up with functional proposals to replace the Irish backstop in the agreement between UK and EU, which is unacceptable to Johnson. No functional proposals have been submitted up to now.

Johnson reiterated that he would not request a further delay of Brexit and that the United Kingdom would leave the European Union on 31 October 2019, either with or without an agreement. It is not clear how Johnson intends to proceed if the new agreement is not concluded. In such a case, the newly passed law against no deal brexit requires the prime minister to request Brussels to postpone the brexit deadline.
From the macro economic view the inflation data was reported last week, which was worse than expected. On a year-on-year basis, the CPI reached 1.7% at the end of August, compared to 2.1% at the end of July. Worse-than-expected consumption indicators were also reported. Retail sales fell by 0.2% at the end of August compared to 0.4% in July.

Central Bank of England then decided on Thursday on interest rates, which decided to leave unchanged at the current level of 0.75%. In its report, the bank warned that in the case of Brexit without an agreement, the British pound would fall sharply, inflation would rise and economic growth would slow.

Technical analysis as at 22/9/2019

GBPUSD has reached the first resistance level in the past week, which we pointed out earlier. This level is in the band around 1.250-1.2570. The weekly chart, see Figure 1, shows that a candlestick has been formed that resembles a doji formation that signals market indecision. The market opened and closed on the same level last week.

Figure 1: GBPUSD on weekly chart
On the daily chart, see Figure 2, we see that, after bouncing off the double bottom support, the price continued to rise and break out from the declining channel. On September 19, 2019 the price surpassed the SMA 100. The following day, however, further growth was rejected and  the price closed below this moving average. At the same time, however, the upper shadow of the candlestick from 20.9. is higher than the previous day.
The price also created a higher high compared to the previous high, which was created between 26-29 August. To definitely confirm the reversal of the trend, it is necessary to wait for the first higher low, which has not been created yet. The faster EMA 50 (red) is still below SMA 100 (green), indicating a continuing downtrend.

Figure 2: GBPUSD on daily chart

As the price is at its resistance, it is now possible to expect at least a slowdown in further price growth with the possibility of some consolidation or correction.  For a long speculation, it is suitable wait for the pullback to the first support around the price level 1.23.  If resistance on the moving average of SMA100 is significantly exceeded, then there will be a space for further strengthening.
Resistance 1 is at a level around 1.250-1.2570.
Resistance 2 is approximately 1.2750 - 1.2850. Here is a confluence with the Fibonacci level of 61.8 and the resistance that arose on May 17, 2019 by breaking through previous support.
Support 1 is in zone 1.2280-1.2330
Support 2 is in the band 1.20 - 1.2050.
Should the United Kingdom agree with the EU on the revised Brexit Agreement, this currency pair could be expected to continue to strengthen sharply.  

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